:U.S. regulators on Friday put large banks on notice that tougher oversight is coming, after the Federal Reserve and Federal Deposit Insurance Corp issued detailed reports on what went wrong and where their supervisors came up short in the run-up to the two biggest bank failures since the Great Financial Crisis.
The Fed's assessment of its inadequacies in identifying problems and pushing for fixes at Santa Clara, California-based Silicon Valley Bank came with promises for tougher supervision and stricter rules for banks.
"In retrospect, the FDIC could have acted sooner and more forcefully to compel the bank's management and its board to address these deficiencies more quickly and more thoroughly," it said. At the time of its failure, SVB had 31 unaddressed citations on its safety and soundness, triple what its peers in the banking sector had, the U.S. central bank's report said.
Before the twin failures in March, banking regulators had focused most of their supervisory firepower on the very biggest U.S. banks that were seen as critical to financial stability. The historic run triggered massive deposit outflows at other regional banks that were seen to have similar weaknesses, including a large proportion of uninsured deposits and big holdings of long-term securities that had lost market value as the Fed raised short-term interest rates.
Since 2020, an average of 40 per cent of positions in the FDIC's large bank supervisory staff in the New York region were vacant or filled by temporary employees, the report said.
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